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SHORT TERM CAPITAL LOSS ON SELL OF SHARES OF PRIVATE COMPANY AND SET OFF AGAINST ANY LTCG

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MANISH TAKWANI

PROPRIETOR

21 Points Posted on 03 November 2023

One of my clients has earned a capital gain of amount X in the current financial year from selling residential property. He invested this amount in the shares of a Private Limited Company through Private Placement during the current financial year itself. He has incurred a loss on such shares to the tune of Rs. Y. Is it possible to set off his capital gain from property against Short Term Capital Loss on sell of shares because the value of shares has reduced by 85 % from the price he paid for the acquisition of the same. Private Placement was done at a fair market value decided by a Merchant Banker during the private placement. The questions are 1. Is set off available ? 2. Is the price of transfer is the price of consideration or price as decided by Merchant Banker is to be taken to compute the profit/loss on sell/transfer ?

Replies (2)

Quick Summary

This discussion explores whether a short-term capital loss incurred from selling shares in a private company can be offset against a long-term capital gain from selling residential property. The key question is whether the loss is considered 'realised' for tax purposes, requiring an actual transfer of shares, and how the transfer price is determined for calculating the gain or loss.

sabyasachi mukherjee

Profession

19978 Points Posted on 03 November 2023

It's not set off in the same way.

CA Raj Doshi

Practising CA

5649 Points Posted on 06 November 2023

Short term capital loss on shares can be set off from long term capital gain arising from sale of residential property. But the shares have to be transferred only then it will qualify as realised short term capital loss. Notional loss in the price of shares without actual transfer shall not be treated as short term capital loss for tax purposes.